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Softbank steps in and tries to save WeWork with a capital infusion of about $8 billion. CEO Adam Neumann is expected to leave the company with a fortune.
In what seems to be a last attempt to save shared workspace company WeWork, Softbank which is by far the superstar of Venture Capital finance firms has decided to wade into the matter once again with a compromise that might just save the company from teetering on the edge of oblivion.
In an agreement that gives Softbank about 80% control of WeWork, co-founder and CEO Adam Neumann is expected to walk away with a bonus package worth about $1. 7 billion. Sources indicate that Softbank has offered the company a line of credit of about $5 billion in new financing with a fast cash infusion of $1.5 billion which the company needs at the moment.
Meanwhile, CEO Adam Neumann is expected to leave the company with a $500 million line of credit from Softbank, about $1.2 billion worth of shares in WeWork and about $185 being a consultancy fee. This, of course, has made many of the human resources angry at the seeming unfairness at the situation at a time when layoffs are already occurring in thousands just to try and save the company.
Before now, Coinspeaker has covered the travesty that WeWork had finally become. From about a month ago when there was a crisis in valuation to the final IPO withdrawal and even an opinion piece had indicated that the IPO was one of the risky ones this year. The guys at Softbank had been mulling pulling one final move to try and save the company before letting it go.
This hasn’t come as an easy decision as Softbank’s stock has been down 2.5% in the past 21 days which indicates investors disapproval of such a measure which indicates an emotional decision which may have nothing to do with the saving of a business.
The deal still goes even further. Softbank is also allowed to buy about $3 billion of stock in a further measure that is aimed at keeping the company afloat no matter what. This brings Softbank’s total commitment to the company to about $8billion and Adam apart from his shares about $685 million. In exchange for all of this, the Venture Capital Investment bank is going to work with WeWork as an associate rather than a subsidiary thus avoiding the recurrent liabilities on the books of the space sharing company which might take many years to resolve.
This goes to show that no matter how beautiful or brilliant a plan or business model may be, it is, the only true test of the model or idea would be for it to go through the fires of the real world first. This tried and tested method is what has kept many companies still standing after hundreds of years.
As to the situation of Softbank’s seemingly mounting losses, only time will tell if the investment bank has made a series of foolhardy decisions or masterstrokes of genius which are way ahead of their time.